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2010 (5) TMI 577 - ITAT LUCKNOWAddition of Rs. 11,15,482 - Methods of accounting - Rental income - Scrutiny - assessee was running a cold storage and revenue was recognized, at the point of time of upliftment/exit of potato in good marketable condition - The storage rent did not become due prior to upliftment, this method has been followed regularly and consistently right from the beginning of the business - assessee did not receive any advance rent and the rent was charged at the time of uplifting of the potatoes since inception and this method of accounting was followed consistently and if the method was to be changed then effect was to be given for the earlier year also - assessee can either adopt a cash system of accounting or mercantile system of accounting and the said method of accounting is to be followed regularly - assessee should have shown the proportionate rental income for the period January to March 2006 also in the assessment year under consideration since the assessee is following mercantile system of accounting, the income for the period starting from 1-1-2006 to 31-3-2006 is to be accounted for on accrual basis for taxing the income in assessment year 2006-07 but the assessee is entitled to set-off of the income relating to the period 1-1-2005 to 31-3-2006 which had been received in the financial year 2005-06 and included in the taxable income, considering that the mercantile system of accounting has been adopted by the assessee
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